If Businesses Spend an Additional $150 Billion for Investment Projects

question 46

Multiple Choice

If businesses spend an additional $150 billion for investment projects in 2010, what will be the impact on national income (Y) if the multiplier is 2?

• A)Y will increase by $50 billion.
• B)Y will increase by $150 billion.
• C)Y will increase by $300 billion.
• D)Y will increase by $450 billion.

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Definitions:

Raw Materials

Primary components used to produce or fabricate products.

Direct Labor

The wages and expenses directly associated with workers who physically produce goods or provide services.

Work in Process Inventory

Represents goods that are in the process of being manufactured but are not yet completed.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including material and labor costs.